MUMBAI: The Securities and Exchange Board of India (Sebi) has directed all entities registered with it, and their agents, to terminate their existing contracts with unregistered financial advisors within three months.
In a circular issued on Tuesday, Sebi said, “All regulated entities and their agents must ensure that any individuals associated with them or their agents do not engage in activities with unregistered financial advisors without prior permission.”
The directive applies to individuals who are not registered with Sebi but provide investment advice or recommendations to the public, either directly or through regulated entities. It also includes those who offer assured returns or performance claims.
The Sebi board had approved measures to restrict such associations on June 27, 2024. Following this, amendments to the relevant regulations were made and notified on August 26, 2024.
Under these amended regulations, entities regulated by Sebi, including recognised stock exchanges, clearing corporations, depositories, and their agents are prohibited from having any direct or indirect association with persons who (i) provide advice or recommendations, directly or indirectly, regarding a security or securities, unless registered with or permitted by Sebi to do so; or (ii) make claims of returns or performance, either expressly or implicitly, regarding a security or securities, unless authorised by Sebi.
The latest circular further said, “Entities regulated by Sebi (including stock exchanges, clearing corporations, and depositories) and their agents are required to terminate their existing contracts, if any, with persons engaged in the aforementioned activities, within three months from the issuance of this circular.”